On February 8, 2013, the Centers for Medicare and Medicaid Services (CMS) published its much-anticipated final rule implementing Section 6002 the Patient Protection and Affordable Care Act, known as the Sunshine Act.  The Sunshine Act requires applicable manufacturers to collect and report to CMS data on payments and transfers of value made to physicians and teaching hospitals.  CMS is then required to post the data on a public website.

The Sunshine Act would have required data collection to begin in 2012 and the information to be posted on the public website by late summer of this year.  Due to CMS’s delay in issuing the final rule, applicable manufacturers will be required to begin collecting data on August 1, 2013, and their first reports will be due to CMS on March 31, 2014.

The final rule adopts most of the provisions set forth in the 2010 proposed rule, but it also makes some noteworthy changes.  These include:

  • The final rule adopts a definition of “applicable manufacturer” that mirrors the statutory definition, whereas the proposed rule would have required reporting by any entity that manufactures a covered product for sale or distribution in the United States.
  • The final rule provides clearer guidelines about reporting support for continuing medical education (CME) where a physician serves on the faculty of the program.  It specifically exempts from reporting payments made to accredited CME providers where the manufacturer does not select the faculty.
  • The final rule abandons the distinction between direct and indirect research proposed by CMS and adopts an approach where research payments are reported in the name of the recipient receiving the payment along with the name of the principal investigators.  CMS will require research payments to be reported on a template separate from the template for reporting other payments and transfers of value.
  • The final rule clarifies that meals must be reported only for physicians who actually partake in the meal.

The final rule contains several provisions that are particularly noteworthy for medical device manufacturers:

  • In response to many comments, including from device manufacturers, the final rule requires that research be subject to a research protocol or a written agreement or contract (but not both, as CMS had proposed).
  • The final rule specifically contemplates that reporting may be required by device manufacturers that do not yet market an FDA-approved or -cleared product.  In the preamble, CMS noted that payment may be available under Medicare, Medicaid, or CHIP for certain investigative devices.  However it declined to provide a bright-line test for when payment is “available,” stating instead that it believes “manufacturers are generally aware when payment is available for their [products] under a Federal health care program.”
  • The final rule clarifies that provision of single use or disposable devices, demonstration devices, or evaluation equipment provided to a covered recipient intended for patient use is excluded from reporting because these items are considered product samples.
  • The final rule establishes that the exemption for items and services provided under a contractual warranty applies even if the warranty period has expired, so long as the contract specified the terms of the warranty prior to expiration and the terms do not change.
  • The final rule provides that payments and transfers of value made in connection with business development activities are not subject to delayed reporting, despite the potentially sensitive nature of these activities.

Covington’s client alert detailing the provisions of the final rule is available here.